Tax boss tells 'scamming' tax agents to end short-term 'sugar hit'

Tax agents have been put on notice for deliberately encouraging their clients to submit over the top work expense claims with Tax commissioner Chris Jordon warning cheating by professionals could undermine the integrity of the taxation system.

Chris Jordan says he wants to win the "hearts and minds" of taxpayers.Credit:Penny Bradfield

“We are continuing to see a level of incorrect claiming for deductions that is concerning - particularly in relation to over-claiming of work-related expenses,” he told the crowd of about 350 tax professionals.

There were different results for self-preparers and those who used an agent. "The incorrect claiming in these random enquiries is actually worse in agent-prepared returns," he said.

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“These results are really disappointing. For years I’ve heard how tax agents were guardians of the system – these random enquiry results tell me this is not the case for some agents."

Mr Jordan, who became tax commissioner in 2013, with a pledge to reinvent the ATO, said his mission was to “build trust and confidence in different generations and in new Australians”.

“Now it is time to focus on winning hearts and minds, the key to willing participation – trust and confidence in the ATO and the tax and super systems more broadly,” he said.

“What struck me was the perception some people may hold that the economy can hinge on my job and the role of the ATO," Mr Jordan said. “Taking money from people and businesses is not always welcomed, and at times we have to be very firm and resolute in our actions so the majority knows we are acting in their interests to ensure everyone is paying the right amount.”

Australia’s tax system was not corrupt, but he realised that "just being free of corruption is not enough”. The public also needed to believe that the “ATO is fair in our decisions and actions, that we are sensible, ethical and empathetic."“When I finish up as commissioner in 2024, I intend to hand over the baton and be able to say ‘the experience with tax and super is better’.”

During audience questions, Mr Jordan discussed his call for the number of random audits of individuals with work-related expense deductions to increase to 1000 after early results showed issues.

"So when the first lot of results came in, I thought they were so disturbing that I said, 'can you just double the number [of random audits] that you did'," he said.

More than $22 billion was claimed in work-related expenses last financial year, and Mr Jordan has said the tax gap for work-related expenses - a theoretical number on how much money the ATO thinks is missing- could be as high or higher than the ATO's estimate of the corporate tax gap of $2.5 billion.

"You don't get given deductions - you either have them or you don't," Mr Jordan said.

Focus on big companies

The renewed focus on small business and individuals did not mean the agency was "taking our foot off the accelerator" when it came to large corporates, he said.

He expected future audits of large companies and multinationals to reveal smaller yields, since they already had visibility over their tax activities.

"People say, 'oh, they [large companies] are too hard', you're coming after poor defenceless me'. Well no, there's just a lot of money there that we have to get better levels of assurance over," he said.

Mr Jordan also spoke about the ATO's close relationship with Treasury and said he often met with Treasury secretary John Fraser formally, as well as informally over dinner in Canberra.

Treasury secretary John Fraser (pictured) has a close relationship with Tax Commissioner Chris Jordan.Credit:Alex Ellinghausen

In terms of the larger market, the Tax Avoidance Taskforce had raised $5.2 billion in liabilities against public groups and multinationals. The Multinational Anti-Avoidance Law (MAAL) was also having an impact, with 38 multinationals having brought, or in the process of bringing, about $7 billion of additional income a year to the Australian tax base.

And because of MAAL, $290 million of additional GST was paid in 2016-17 by taxpayers who had restructured to recognise an Australian taxable presence. He said an extra $206 million in GST has already been collected in 2017-18.

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The Chevron tax case had seen some taxpayers with cross-border-related party financing arrangements talk to the ATO in relation to some $80 billion of related-party loans, resulting in a reduction of about $1.4 billion in interest deductions in the 2018 year alone.

Black economy

In relation to the black economy, or cash economy, the ATO had visited more than 2600 businesses across eight locations last year. In the first six months of 2017-18, the agency conducted 5020 reviews and audits, resulting in about $143 million in tax and penalties.